The Problem of a Multi Grid Economy

My last post was about the slowly being developed 3D Internet, which I am guessing is likely to be built on the Open Simulator platform. There are other open source platforms in the competition, Open Cobalt is one I mentioned, while Open Wonderland is one mentioned in the comments. For completeness sake, I should also mention Sirikata, another open source platform.

Don’t expect a battle royale between these different open source platforms. It is possible that in the end, they all might work together. The IEEE (a major engineering organization that develops standards for web protocols) has put together a workgroup called VWRAP (Virtual World Region Agent Protocol). The group’s first easy to read paper on the topic can be found here in PDF form, if you are more technically inclined, you can read their preliminary drafts here.

From a Second Life perspective, a 3D Internet presents many challenges. The biggest one on the minds of most people is “How do I make money?” Because of the open nature of a 3D internet, any rules regarding permissions and copying simply cannot be enforced. The Second Life economic model will not work. There will be money making opportunities on the 3D internet, but the buying and selling of 3D goods for virtual cash can only be done in a closed off system like Second Life or an individual Open Sim grid. The 3D internet will involve multiple grids and possibly multiple platforms. Moving stuff from grid to grid, platform to platform, and avatar to avatar makes the SL economic system worthless.

Second Life’s Flawed Intellectual Property Policy

Before discussing what a multigrid economy might look like, lets take a look at the biggest weakness with the Second Life economic model.

Second Life is the first ever to try creating a virtual economy where people retain ownership of their creations. When Second Life decided that was what they wanted to do, a lot of people said it was unprecedented and would never work.

Guess what? It doesn’t work!

There are two court cases right now, one I mentioned here, and another detailed here. Both take issue with SL’s Intellectual Property policy from two different perspectives. While neither case has been tried yet, these cases are the apparent cause of Second Life’s recent rather draconian Terms of Service changes.

The problem with making an unprecedented policy is that the legal ramifications are unclear, and it may cost quite a bit of legal fees to hammer out clarity in the courts, a price I am not sure LL is willing to pay. Eventually, Linden Labs is going to have to change to one of these two proven models:

1. The There/IMVU/Facebook/MySpace model where “We own everything you upload, so you can’t sue us if your stuff is copied, or if we remove your stuff, because we own it, not you”.

2. The Internet Host/OSGrid/Google model where “We just sell the server space and index stuff for search, so solve your own damn Intellectual Property issues.”

SL Beta member Oz Spade made a good response to this:

I think LL intended to do #2, but wasn’t doing it fast enough or in the right ways. I recall when they first announced this whole IP thing and people were asking questions like this and the answer was “well eventually we want to be like an ISP or Linux distributor or website hoster, we host, provide access to content, and support and you do everything else.” Which is fine, and would work if they really were going for that model and not sitting on their ass trying to sweep up the cash. The problem they’re having is relinquishing control because, well, they’re a company, and not a non-profit.

The other problem with that model is, in the example of the ISP/hoster you still have to respond to take down requests and “violations.” The difference between LL and the other models is, with the other models your content can go with you, i.e. you can have all the html files on your computer and take them to another hoster. However with SL, your content, if you play by the rules, can only be accessed via SL grid. So in reality they aren’t really providing only a hosting service, which is what fucks them and is completely their mistake / stupid-attempt-to-keep-out-competition-that-might-use-their-software-features. It’s like if to host a website on a hoster you had to write your website in a special language that could only be written and hosted on that hoster and you couldn’t convert it to html without hacking around.

So basically they made a legal decision before they had worked out all the kinks in the technology that uses it. Or had made a legal decision without wanting to fully commit due to money/selfishness/whateverdouchery.

The first thing they should have done when saying “you own the IP” is make sure that you can take that IP with you, that you actually DO own it. And this is what people have been screaming for since they announced it and why we have things that people freak out about like “copybot” and other ways to “illegally” copy objects/etc. If LL had ignored the douches freaking out about “holy shit people will steal shit!” and actually implemented backup features properly that allowed content to travel with the creators, we would be avoiding a majority of this bullshit.

Seems spot on to me.

And another problem I have not even mentioned is the conversion of dollars to lindens and vice versa. Linden Labs has insisted that the “Linden” currency has no real value outside of the game, and yet nobody believes that. Lots of virtual worlds, both 2D and 3D, have virtual currencies exchangeable for money. If a court were to rule that these virtual currencies should be treated like real money, it opens a whole new can of worms legally speaking.

Linden Labs is not going to be able to straddle the line between IP freedom and IP protectionism for long.

Eventually these legal difficulties could eventually follow over to other grids, or other grids could take this as a precautionary lesson and try something else.

A Possible Open Grid Economic Model

The SL economic model can only possibly work in SL, because there is one entity that controls all the asset servers.

In an Open Grid model with cross grid travel and communication there will be hundreds of asset servers controlled by hundreds of independent companies, just like the 2D internet is controlled by hundreds of web hosts. In the case of avatars, everyone may possibly host their own avatar outside the grids, so we could be talking thousands of asset servers.

An OpenSim grid is going to have to toss the whole SL paradigm out completely. Forget about inventory, selling individual units, and permissions, it won’t work in an open grid.

The open grid must work as a true 3D internet, with the internet as a paradigm.
Region = website
grid = webhost
inventory = stuff you store on your computer or via “cloud”

Think of the way the internet works now. If I have a website, or blog, or facebook account, etc. I can easily copy pictures, text, scripts, music embeds, etc, from other websites and post them on my web site. Its my responsibility to make sure I have the rights to what I post, but of course, most people don’t check the rights of everything they post. Since most sites are non-commercial, and visited by very few people, nobody gives a damn mostly.

On the other hand, if a site gets popular, and designed to make money, or has a big company behind it, then that website will be required to have the rights to all content on that site, or find itself with a cease and desist notice, or the web host might get a take-down notice and suddenly your site is gone.

This is the way an open grid has to work as well: everything is full perm, but copyrights are still in play.

What is needed are sites similar to Renderosity for open sim grids. Nothing on Renderosity is ever copy protected, because it makes it unusable. Buying a file is not what is important, it is buying a license, which is why most things are overpriced at Renderosity, but if you are using Renderosity objects for a commercial project, you damn well better have a receipt.

That has to be the model for open grid as well. For example I make a couch object that in SL could sell for maybe 100L. For Open Sim I sell a commercial license for $10 or about 25 times the SL sales price, which I sell on a specialized website. If someone buys it, they get a full perm object that they can edit, or copy, or give away, but can’t legally sell. Most Open Sim grids have no in world currency so I can’t sell there anyways. I could try to post it for sale on a specialized website, but if the website is a legitimate one, they could investigate the origin of the items on sale on their site and prevent resales.

Because the object in world is copyable, why would anyone buy a copy when they could just grab a copy in world? Well that is where the “Internet” paradigm takes over. You could just grab a copy and post it on your region, but if the region is commercial in any way, you damn well have a commercial license for the object or be potentially subjected to litigation or grid take down.

The big money in Open Sim is going to be in the building of commercial regions for clients. Professional region builders who want to use your couch will definitely pay the $10 for the license to use it, just as the region builder expects to be paid for use of his region model for anyone that uses it.

I have proposed this idea to many, the primary objection is that it will limit the people that make money to only the best creators. I’m sure that other methods of making money on the 3D internet would emerge that we have not thought of yet. My primary point is that the SL economic model is not one we can (or should) consider.

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The Internet has, for all intents and purposes, no decent copy protections whatsoever. You can copy-and-paste any photo or text that you see, share any file, etc — but that hasn’t slowed the growth of e-commerce much. In fact, the iTunes stores clearly demonstrates that if the shopping experience is easy enough and pleasant enough, people will choose it over free pirated content elsewhere.

Print content is the easiest of all to copy. I’m sure there are folks out there plagiarizing my work right and left. But they minute they go out and try to sell it, they run into copyright liability issues. In fact, I’ve only seen a couple of cases where someone re-posted my entire articles — and both of those were accidental (they were trying to post excerpts, and link back to the originals, but got the entire article instead).

OpenSim has much more content protection than the World Wide Web. Scripts, textures, and objects can be designated “no copy” or “no transfer.” (I would also like to see a “no cross-grid” option added for content developers who want their content to stay within a particular grid. That will probably come!)

Yes, it’s easy to violate these restrictions. Whether by using copy bot, or hacking into an OpenSim asset database, a determined and technically savvy thief can undo these protections and steal the content.

But this is MUCH HARDER to do than it is on the World Wide Web. But it’s no harder than in Second Life.

If someone starts making money off of stolen content — especially if they’re making a lot of money — that’s a lawsuit in waiting. For example, my company’s grid is open to the public — it’s hypergrid-accessible. You can teleport in from any of the hundreds of other hypergrid-enabled destinations out there, no new log in required.

And if you’ve got some ethical problems and technical skills you will be able to rip off my corporate buildings, our company’s welcome sign, our meeting rooms, and other content. So what? If you go into business under our brand name, we will shut you down immediately. If you go into business under a slightly different brand name, and try to sell our products at a discount to our customers, we will shut you down. If you use our content for your own internal needs then eventually one of your employees will rat you out or an internal audit will uncover unlicensed content. There’s a reason corporations would rather pay extra for a brand-name product — one of the many benefits that they get is a higher degree of assurance that the content is property licensed.

That just leaves one potential viable use case for my stolen content. Someone downloads it and uses it at home, in private, or with a small group of friends, alongside their pirated MP3s, their illegally downloaded movies and their knock-off watches.

Do I care about these guys? Yeah, a little bit.

What can I do? First, I can make sure that the basic protections are in place — just because “no transfer” can be hacked, doesn’t mean you shouldn’t use it. It puts everyone on proper notice that the item is not for distribution.

Second, I will make sure that there are plenty of legal, convenient, and appealing channels for people who want my content to get it legitimately. For us, this means that we post most of our articles and directories on our websites, for anyone to visit, and our contact info for those folks who want to hire us to do more.

For evidence that is working, take a look at the growth of the OMC currency. It’s backed by an Austrian company, Virwox, which has been active in the Linden Dollar exchange space for a while now.

It’s currency is currently accepted on eight grids, and the total money in circulation has been growing steadily since it launched a couple of months back.

This currency is hypergrid-enabled and integrated with your browser — you can go to any of these grids to shop and bring things back to your home grid, all permissions intact. Your OMC balance shows up in the upper right hand of your viewer screen, and all payment functionality, including LSL scripting, is the same as in Second Life.

We will probably see some other similar platforms emerge as well — after all, PayPal isn’t the only payment option on the Internet.

Not all grids currently support OMC. Because of security issues, each grid is enabled individually before merchants can start using the currency. But most grids don’t need it — my private company grid doesn’t really need an in-world currency. The stuff we sell is too expensive for micropayments — if we need to accept payments, we use PayPal. But we’re more than happy to teleport to Grid4Us or one of the other grids that have this currency in order to buy new furniture, PowerPoint slide projectors and other business tools, buildings and landscaping and even clothes and accessories.

I just got off the phone with the operator of one of these grids, which offers a shopping destination with payments in OMC. He tells me that half of his traffic is via the hypergrid. By opening up the grid to the hypergridding public, he’s doubled the customers for his grid’s merchants.

Yes, some of those potential visitors can rip content. But he tells me that content theft happens with or without the hypergrid — anyone can create a free account on his grids and then go in and steal stuff, if they’re technically adept and so determined, same as they now do in Second Life. Hypergrid, instead, opens up an opportunity for legitimate customers to come and shop easily and security for goods that they will use back home on grids (like private school or company grids) that don’t have shopping centers.

To me, it looks like we’re seeing the birth of a new generation of e-commerce. All we need now is a catchy name. V-commerce? Sim-commerce? 3D commerce?

I totally agree with most everything you say. My only problem with virtual currency is its shaky legal existence. I know I had over $100 worth of Therebux when There closed down, now lost. Virtual currency also brings with it virtual gambling, virtual money scams, and other legal thorns.

The point of me writing this was to say, the Open Sim grids are not SL, and should not pretend to be. Grid runners need to be up front and say,”We will not protect your IP, your e-commerce, nor are we here to protect from copybotters or scammers.” That is another reason SL is finding itself in court.

The lack of copy protection on the internet is probably one of the primary reasons for its growth. The copy protection in Open Sim is legacy from Second Life, and could probably be done away with (leaving it up to the grid owners to decide) without serious harm to e-commerce as you pointed out.

At the very least it would make collaboration on private grids easier with it turned off.

The ability to back up your entire inventory (regardless of source, as long as you own it) to your own hard drive could be a big selling point to Open Sim if implemented. It would drive home the point of ownership, and could actually increase legitimate e-sales across all grids.

I don’t agree with the notion that cross grid economies are impossible. What it would take is an underlying distributed persistent storage mechanism that included unforgeable identity for objects/items, and users and unforgeable data relating the two in terms of creation, ownership and permissions. How do we do this? Well how do we do public key identity? How do we validate software downloads? We use pubsic key encryption and hashing and other cryptographic methods.

I think it is quite doable. If it isn’t we may as well give up on the entire internet and any sort of shared trustworthy distributed computational space whatsoever.

I also think that virtual currencies are solvable once you have guaranteed secure object identities and data records encoding protocols in place. When you have that you don’t get counterfeit tokens. The next part is to base the currency on something real world that tokens are freely convertible back and forth too at rates that are not arbitrarily set by any particular world provider. For instance peg a unit of your currency to such and such fraction of a US dollar. An interesting one would be to peg it to a very small fraction of a gram of gold.

It allows you to have a single account with money in it — that shows up in your browser — that you can use for shopping on any OMC-enabled grid. You can hypergrid teleport between grids, and bring stuff you buy home to your own grid.

Virwox has been in business for a while, and is one of the leading Linden exchange platforms, focusing on the European market. It’s incorporated in Austria.

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